Lawmakers stand firm on taxes as talks start

President Barack Obama makes a statement in the Eisenhower Executive Office Building, on the White House campus in Washington, Tuesday, Nov. 30, 2010, about his meeting today with Republican and Democratic Congressional leaders. (AP Photo/J. Scott Applewhite)

/ AP

President Barack Obama makes a statement in the Eisenhower Executive Office Building, on the White House campus in Washington, Tuesday, Nov. 30, 2010, about his meeting today with Republican and Democratic Congressional leaders. (AP Photo/J. Scott Applewhite)

President Barack Obama makes a statement in the Eisenhower Executive Office Building, on the White House campus in Washington, Tuesday, Nov. 30, 2010, about his meeting today with Republican and Democratic Congressional leaders. (AP Photo/J. Scott Applewhite) (/ AP)

STEPHEN OHLEMACHER, Associated Press

Democrats and Republicans are working to reach a deal to extend Bush-era tax cuts that expire at the end of the year, but neither side is budging as negotiations begin in earnest.

Even as they talk, House leaders are planning to hold a politically charged vote Thursday to extend middle-class tax cuts while letting taxes for the wealthy rise.

The bill, even if it passes the House, stands no chance in the Senate. Nevertheless, Senate Majority Leader Harry Reid, D-Nev., said he is considering holding a similar vote.

"House Democrats have long supported extending the tax cuts for America's middle class," House Speaker Nancy Pelosi said. "Democrats continue to have concerns about the impact on the deficit of giving a tax cut to the nation's wealthiest 2 percent."

A small working group of administration officials and lawmakers from both parties began meeting Wednesday morning to negotiate a deal on tax cuts. They emerged after nearly two hours to say they had agreed to continue talking later in the day.

"No surprises," Treasury Secretary Timothy Geithner said. "We went through everything on the table, and we agreed we were going to come back this afternoon late in the day and continue the conversations. And we also agreed it's very important that we're not to characterize discussions in the room."

Obama and Democratic leaders in Congress want to extend tax cuts for individuals making less than $200,000 and married couples making less than $250,000. Republicans and some rank-and-file Democrats want to extend the tax cuts for everyone.

Obama signaled he was ready to compromise after elections in which Republicans won control of the House and gained seats in the Senate. But the president has yet to make a detailed proposal.

Senate Republicans, meanwhile, said they intend to block action on all Democratic-backed legislation until the Senate votes to the fund the government and prevent the looming tax increases, according to a letter to Reid signed by all 42 Senate Republicans.

If carried out, that strategy could doom Democratic-backed attempts to end the Pentagon's practice of discharging openly gay members of the military service and give legal status to young illegal immigrants who join the military or attend college.

Reid has made both measures a priority as Democrats attempt to enact legislation long sought by groups that supported them in the recent midterm elections.

Republicans have little incentive to make major concessions in December, considering their power on Capitol Hill will greatly increase in January. Democrats still control both chambers until the end of the year, but they need Republican votes in the Senate to pass a tax bill.

"If President Obama and Democratic leaders come up with a plan in the lame-duck session to cut spending and stop all the tax hikes, they can expect a positive response from Republicans," said House Republican leader John Boehner of Ohio, who is in line to become the new speaker in January. "If the lame-duck Congress is unable or unwilling to act, the new House majority will in January."

The president appointed Geithner and Budget Director Jacob Lew to the tax negotiating group. Rep. Dave Camp of Michigan, the top Republican on the House Ways and Means Committee, will represent House Republicans and Rep. Chris Van Hollen of Maryland will represent House Democrats. Sen. Max Baucus of Montana, chairman of the Senate Finance Committee, will represent Senate Democrats; Sen. Jon Kyl of Arizona, the second ranking GOP leader in the Senate, will represent Senate Republicans.